Random Thought on Illegal Immigrants

I call bullshit on the argument that illegal immigrants are leeching off of the system. I’m no longer a tax guy but I do think about the relevant tax issues, so let me break down a simple scenario for you.

Lets imagine a grocery store; the owner of the store (lets call him Mr. Burns) is a millionaire. He is in the top tax bracket (35%). A guy named Ross works for him. Now, there are two possible cases that I want to address:

1) Ross is a legal immigrant or US born citizen.

2) Burns knows Ross is an illegal and pays Ross under the table.

Case 1:

Ross earns 100k working at the grocery store. Here is the tax impact

Ross takes the standard deduction, personal exemption, etc, so he gets his income down to 90k. With the step tax system his tax on income for the year is 19k. We are looking exclusively at federal tax impact btw, because the issue is with federal benefits (an army to protect Ross from the bad guys and social security to keep Ross warm when he gets old).

Medicare: 1.45% of the 100K = 1,450

Social Security 6.2% * 100K = 6,200

Total Tax to Federal Gov’t = 26,650

Case 2:

Obviously Burns won’t pay Ross as much money however lets disregard this for parity purposes (or, to make it more palatable, have it be two people earning 50k each; Ross and his evil twin Russ). However, it is important to realize that the 100K that Burns paid to Ross in case 1 was tax deductible which it isn’t in this case because he pays him under the table. So how much does the Gov’t get?

The additional 100K of income to Burns (who is, like I said before in a higher tax bracket than Ross) generates the following marginal tax liability:

Income: 35,000 (after earning approx 350k every dollar is taxed at a 35% tax rate)

Medicare: 1,450

Social Security: 6,200

Total Tax to Federal Gov’t: 42,650

So, the Federal Government actually gets more money because of our tax structure, good for the poor right? Our country has a wonderful array of support services for the needy, however guess what? Ross is ineligible for many of these services, leaving more money in the system for everyone else. Ross getting paid under the table helps US citizens.

Of course, this is disregarding the myriad other taxes that Ross pays, for which he receives no benefit at all. The landlord that gets his rent has to pay taxes on it, doesn’t he? The food, clothing, gas, cigarettes and liquor that Ross buys are taxed.

All Ross can really get out of paying all this money to the gov’t is that his kids can go to public schools.

If they receive no benefit out of paying these taxes, aren’t the taxes more of a fine? A fine that every illegal has to pay every day for being in this country.